CFTC Staff Letter 97-05: No-Action for Exemption from CTA Registration for Offshore Fund Advice

97-05
CFTC Letter No. 97-05
February 12, 1997
Division of Trading & Markets
Re: Request for Relief from Registration as a Commodity Trading Advisor Dear :
This letter is in response to your letter dated May 24, 1996, to the Division of Trading and Markets ("the Division") of the Commodity Futures Trading Commission (the "Commission"), as supplemented by your letters dated July 2, 1996, July 15, 1996, August 19, 1996, October 16, 1996, and January 31, 1997 as well as telephone conversations with Division staff. By your correspondence, you request relief from registration as a commodity trading advisor ("CTA") under Section 4m(1) of the Commodity Exchange Act (the "Act")1 for "X", a Colorado corporation, in connection with providing advisory services to (the "Fund"). Based upon the representations made in your letter, as supplemented, we understand the facts to be as follows. The Fund is an exempted company with limited liability,2 incorporated in the Cayman Islands, and will be operated as an offshore fund. The investment objective of the Fund is long-term capital appreciation through investments in equity securities. Interests in the Fund will not be offered, sold, or transferred to any United States person, as that term is defined in Rule
4.7.3 Interests in the Fund will only be offered to high net worth individuals and institutions. The
minimum subscription will be $250,000.
"A", the Chairman and President of "X", will sit as a director of the Fund on behalf of "X", but you represent that he "will not be involved in any aspect of portfolio management for the Fund." All other directors of the Fund will be non-United States persons. "X" owns neither voting nor participatory shares in the Fund. Moreover, "X" is not involved in marketing or soliciting participations in the Fund, nor is it involved in administrative matters or distribution of shares for the Fund.4 "X" is not registered with the Commission in any capacity,5 but is registered with the Securities and Exchange Commission ("SEC") as an investment adviser under the Investment Advisers Act of 1940, and as such, provides investment advice to a number of companies registered with the SEC. "X" provides commodity interest trading advice to the Fund that is intended to be solely incidental to its business of providing securities advice to the Fund. Commission Rule 4.14(a)(8) provides an exemption from registration as a CTA for an investment adviser registered under the file:///S|/Website%20Management/LegacyDataCopyasof2010-04-21/tm/letters/97letters/tm97-05.htm (1 of 4) [5/6/2010 7:35:02 PM]